Merchandise Export

Merchandise Export

Subject : Economy

Section :External sector

Context:

The Economic Survey 2021-22 projected a GDP growth of 8-8.5 per cent in 2022-23, with exports playing a crucial role.

Content:

Merchandise export trends

• Merchandise exports touched an all-time high of $375 billion during April-February 2021-22 — more than yearly exports ever registered so far. India targeted to achieve a merchandise export of US$ 400 billion by 2021-22

India’s merchandise exports

• Top 5 Export Commodities (% share in total export)

Note- In 2020-21 top 5th good to be exported was electric machinery and equipment with total share in export at 2.8% and top 6th Organic chemicals with a share of 2.6%

• The USA remained the top export destination, followed by UAE and China. Belgium has replaced Malaysia and entered into the top 10 leading export destinations of India

Top 10 Export Destinations of India by % share

• India has diversified its export destinations in the last 25 years, yet more than 40% India’s exports are still accounted for by only 7 countries. Only eight products constitute more than 55 per cent of the country’s total exports, there is a critical need for product diversification.
• India, has been the largest software exporting country (WTO report 2021).

Concerns?

• Impact of Ukraine war-India does not have significant merchandise trade with Russia or Ukraine, however, exports of pharmaceuticals, telecom instruments, tea, coffee, marine products, etc are likely to be hit.
• The logistics cost in India (14 percent of GDP) is higher than that of developed countries (8-10 percent of GDP) (LEADS 2021 Report)
• Lack of diversification

Major Schemes & Initiatives to boost exports

• Remission of Duties and Taxes on Exported Products (RoDTEP)– Based on the globally accepted principle that taxes and duties should not be exported, this scheme is an improvement over Merchandise Exports from India Scheme (MEIS).This new scheme reimburses currently un-refunded Central, State, and Local taxes and duties incurred in the process of manufacture and distribution of exported products and thereby provides a level playing field to domestic industry abroad. Major components of taxes covered are electricity duty, value-added tax (VAT) on fuels used in transportation/ distribution, mandi tax, stamp duty, etc.
• Developing District as Export Hub-the focus is to make districts active stakeholders in the promotion of exports of goods/services produced/ manufactured in the district. District Export Promotion Committees (DEPCs) have been set up in each district. Products with export potential (including agricultural, geographical indication (GI) & toy clusters) have been identified in all 739 districts across the country.
• Production-Linked Incentive (PLI) scheme– for 14 key sectors starting from 2021-22. The scheme provides incentives to companies on incremental sales for products manufactured in domestic units, which is expected to create minimum production of over US$ 500 billion in 5 years. Automobiles and auto components, pharmaceutical drugs, telecom & networking products, electronic/ technology products, etc are  some of the sectors covered under the PLI scheme.
• Electronic Platform for Preferential Certificate of Origin (CoO)-In view of the COVID-19 crisis, on-boarding of FTAs/ preferential trade agreements (PTAs) was quickly done to allow electronic issuance to avoid physical movement.
• Infusion of capital in EXIM Bank
• Export Credit Guarantee Corporation of India Ltd. (ECGC) -provides insurance cover to banks against risks in export credit lending to the exporter borrowers.
• Export Promotion Capital Goods (EPCG) Scheme-In order to increase procurement of capital goods from indigenous manufacturers under the EPCG scheme, the government has reduced specific export obligations from 90 per cent to 75 percent of the normal export obligation
• The export promotion schemes such as Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI), Special Economic Zone (SEZ) scheme, Emergency Credit Line Guarantee Scheme (ECLGS) and Advance Authorization Scheme continue to provide support to trade infrastructure and marketing.
• The Union Budget has increased capital expenditure by 35 per cent to crowd-in private investment, to enable a virtuous cycle of investment for developing integrated infrastructure.
• One Station-One Product- will complement the initiative of developing ‘Districts as Export Hubs’ and support the government efforts in diversifying the product basket of Indian exports.
• Emergency Credit Linked Guarantee Scheme (ECLGGS) up to March 2023 and infusion of funds into Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will benefit the MSME sector.
• Enabling an efficient Logistics eco-system to boost exports-
  • PM Gati Shakti National Master Plan-aims to provide multimodal connectivity to various economic zones and integrate the infrastructure linkages holistically for seamless movement of people, goods & services to improve logistics efficiency.
  • Others-introduction of FASTag, Turant Customs, mandatory RFID (Radio Frequency Identification) tagging at all EXIM bound containers, E-San chit, Indian Customs Enquiry for Trade Assistance and Knowledge (ICETRAK), ICEDASH (Indian Customs EDI Dashboard), Secured Logistics Document Exchange (SLDE), Import Clearance System, GHG Calculator etc. In order to ease maritime trade, efforts are being undertaken on development of port-specific master plans and a coordination mechanism for implementation of the same, upgradation of select Land Customs Stations (LCS) to Integrated Check Posts (ICPs), promoting Free Trade Warehousing Zones, etc.